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5 big analyst AI moves: Micron upgraded amid ‘unprecedented outlook for memory’

0 — Here are the biggest analyst moves in the area of artificial intelligence (AI) for this week.

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Apple’s focus on AI ‘clearly visible’ – BofA

During the week, analysts at Bank of America (NYSE:BAC) Securities reiterated a Buy rating and a $230 price target.

The move came after Apple (NASDAQ:AAPL) held its much-awaited iPad event, which, according to BofA, showed that the tech giant’s focus on AI is “clearly visible.”

Analysts said Apple continues to impress with its hardware, particularly with its innovations in silicon technology, introducing the new M4 chip in the iPad Pro.

The advanced Neural Engine within the M4 chip enables “AI-enabled functionality,” such as isolating subjects from backgrounds in 4K video with Apple’s Final Cut Pro.

It also allows the detection of documents, uses AI to rearrange frames, and removes shadows in images. Furthermore, new features in iPadOS offer enhancements like visual look-up, live text, and subject lift.

“No change to our estimates or price objective. Maintain Buy on beneficiary of GenAI at the edge, with GM upside and momentum in services,” BofA wrote.

Baird upgrades Micron stock to Buy

Baird analysts shared the latest takeaways from their research on the semiconductor industry earlier in the week.

The most significant change is their upgrade in the rating of Micron (NASDAQ:MU), moving the stock from Neutral to Outperform.

The investment firm said it sees substantial upside potential for the U.S.’s largest memory chipmaker, whose products are critical for powering the immensely demanding AI models.

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“While catching the train a bit late, we see meaningful upside opportunities ahead for Micron notably given the stock’s recent pullback, in discrepancy with incrementally positive trends unfolding in DRAM per our recent channel checks, yielding to a somewhat unprecedented outlook for memory over the next 12-18 months,” Baird analysts said.

Baird highlighted that DRAM prices are exceeding channel expectations, with industry-wide supply growth expected to slow to low single digits quarter-over-quarter in the second half of 2024, partly due to capacity shifts toward high-bandwidth memory (HBM). Analysts foresee a new supercycle for HBM, offering substantial gross margin potential for Micron akin to the early NAND ramp.

“Micron has the potential to generate 60%+ gross margin on its HBM3E production, with migration from 8H to 12H later this calendar year increasing yields. Micron has the potential to gain a high single-digit market share in HBM exiting C2024,” noted analysts.

RBC bullish on ServiceNow after analyst day

On Monday, cloud and AI software maker ServiceNow (NYSE:NOW) hosted its financial analyst day in Las Vegas, garnering a largely favorable reaction from analysts.

In a research note, RBC Capital expressed a more optimistic outlook for the company’s potential, emphasizing that generative AI functionality “should be infused across every workflow in every product across every industry.”

“The company did a good job at providing additional, early context on the opportunity around Pro Plus adoption while platform innovation and expansion likely point to additional significant opportunities to come, including around the front office,” noted RBC.

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Looking ahead, ServiceNow is still “one of the best positioned to monetize GenAI and one of our best ideas,” the firm’s analysts highlighted.

In a separate note, Morgan Stanley (NYSE:MS) analysts noted that the Analyst Day effectively showcased the core of the long-term investment thesis for NOW. Specifically, the Wall Street giant emphasized the company’s expanding opportunities, its effective execution in seizing these opportunities, and its best-in-class unit economics.

Citi ups Palantir stock PT but maintains cautious stance

Palantir Technologies (NYSE:PLTR) raised its annual guidance on Monday after reporting quarterly revenue that exceeded Wall Street expectations, buoyed by new contracts amid the ongoing surge in artificial intelligence.

Despite this, the guidance remained below Wall Street’s projections, leading to a sharp decline in the company’s shares the following day.

Even so, analysts at Citi Research maintained a cautiously optimistic outlook on the AI software company.

“In what is always a mass of unique metrics to unpack, PLTR’s Q1 results showed solid upside on both top and bottom line with a slight upward revision to full year targets,” they said.

“The company’s new customer acquisition momentum continued with record new additions, while commercial deal value growth was also quite healthy. The main nits in the quarter were around weaker collections with billings growth of just +2%, and weaker operating cash flow,” analysts added.

The investment bank lifted its 12-month target price from $23 to $25 but maintained a Neutral rating on the stock, noting it trades “at one of the highest EV/Sales multiples in software and as we await more conviction in the durability of growth + AIP monetization.”

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Benchmark: Roblox is ‘a standout in AI-driven environment’

Shares in video game developer Roblox (NYSE:RBLX) fell sharply on Thursday, after the company reported worse-than-expected first-quarter results and guidance.

The company’s revenue of $801.3 million narrowly missed Visible Alpha’s estimate of $806.2 million.

However, revenue surged 22% year-over-year from the $655.3 million reported in the first quarter of 2023.

Prior to the report’s release, Benchmark analysts, in a research note, predicted continued success in revenue growth driven by stringent cost controls, which should lead to substantial operating leverage and increased cash flow.

“Roblox is embarking on a promising new growth opportunity by introducing advertising to its platform this year, a move that is expected to be successful given the company’s innovative approach and large user base,” said Benchmark analysts.

In terms of AI, Roblox leverages the burgeoning technology to improve platform safety, reduce costs via efficient moderation tools, and support developers through content creation features like Avatar Auto Setup and Texture Generator, which boost game quality and quantity, Benchmark highlighted.

Moreover, AI-driven real-time chat translations expand global access. The firm considers Roblox a “standout” in the AI-driven environment, stating that “substantial evidence shows that AI tools can accelerate net bookings, enhance safety and trust, and reduce expenses.”

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